Warning of a huge jump in insolvencies during next year
The number of individuals and companies that are declared insolvent looks set to soar next year following the recent tightening in the credit markets, a trade body has warned.
Insolvency trade group R3 said its members expected business insolvencies to jump by 41 per cent during 2009 compared with 2007, while personal ones could rise by 22 per cent.
They predict 18,440 companies will go under next year, compared with 13,091 in 2007, the last full year for which figures are available.
But this estimate could prove too conservative, with 18 per cent of those questioned expecting more than 20,000 firms to be declared insolvent during 2009.
The number of consumers declared bankrupt or who take out an Individual Voluntary Arrangement is also expected to soar.
Official figures show that 121,796 people were declared insolvent during 2007, but insolvency practitioners expect this number to rise to 132,700 this year and 148,352 by the end of 2009.
Nick O’Reilly, president of R3, said: “The predicted 41 per cent increase in business insolvencies from 2007 to 2009 is catastrophic and unfortunately will mean we will start to approach the numbers we saw at the peak of the last recession in 1992.
“For the last three or four years a number of businesses that perhaps were not performing well have been kept alive artificially by the easy availability of credit, which has now dried up.”
He said the group expected personal insolvencies to peak during the second quarter of next year.
He said: “Traditionally the route into personal insolvency is not an overnight process and people will put off dealing with financial problems until they have exhausted all other options.
“We would anticipate a nine month lag, with a spike in the figures for the second quarter of 2009.” Around 56 per cent of the practitioners questioned in the survey said they expected to see the number of homes repossessed by mortgage lenders “increase a lot” by the end of next year.
More than half also said they had seen a rise in the number of lenders trying to repossess people’s homes.